Due to McDonald’s popularity, many people have invested in a McDonald’s franchise to make their fortune. Are you wondering how much a McDonald’s franchise costs in 2023, as you have similar plans? You have come to the right post in that case!
A McDonald’s franchise’s average cost is between $481,000 to $2,450,000. This includes a lot of expenses, from the initial investment to the rent and inventory. The price of a franchise can vary between this large margin based on various factors.
McDonald’s opened their doors decades ago; their business has been booming. Ever since then, the company has begun giving out franchises. Since McDonald’s is a profitable business no matter where they open a restaurant, it may seem like a great idea to invest in a McDonald’s franchise of your own.
It is easy to open a McDonald’s franchise and maintain it, but at the same time, it is not easy either. Many factors are to be considered regarding the cost of a franchise. This post will give you a complete breakdown of the expenses needed to open a McDonald’s franchise and a few helpful tips and tricks!
Cost Of Opening A McDonald’s Franchise Store
The fee for satellite location is the lowest, where the total ranges from $481,000 to $820,500. As the location is more prominent, the cost spikes from $942,000 to $1,640,500, like STR locations. Lastly, for every other franchise location, the cost of opening a store ranges from $1,366,000 to $2,450,000.
Although the main range of how much it would cost to open a McDonald’s franchise has been mentioned above, many factors come into play. All these factors are also the primary reason why the margin of opening a franchise is so vast.
While investing in a McDonald’s franchise, some factors that are considered are the initial franchise fee, which depends on the type of establishment you go for. Moreover, subsequent costs are associated with real estate, decor, and inventory, along with additional and miscellaneous expenses.
The breakdown of all the costs is given in the table below.
| Type Of Expenditure | Amount ( Satellite, STR, other Franchises) |
|---|---|
| Initial Franchise Fee | $0 -$500, $22,500, $45,000 |
| Real Estate (3 Months Rent) | $0-$60,000, $0-$60,000, $0-$313,000 |
| Decor and Equipment | $340,000-$ 520,000 $670,000-$1,210,000 $1,000,000-$1,600,000 |
| Inventory | $10,000-$32,000 $13,500-$25,000 $20,000-$39,000 |
| Miscellaneous Expenses | $48,000-$60,000 |
| Travel and Living Expenses | $3,000-$38,000 |
| Additional Funds (For 3 Months) | $80,000-$110,000 $185,000-$225,000 $250,000-$355,000 |
| Total | $481,000-$820, 500$942,000-$1,640,500$1, 366,000-$2,450,000 |
(Source – vettedbiz.com)
(Note – STR locations stands for Small-Town Retail, Satellite locations are those that are present inside offices/shops of other companies, like McDonald’s store in Walmart)
Once you enter a franchise training program with McDonald’s, the company also considers factors like commitment to training programs, efforts, investment without a partnership, openness to relocate based on location, and lastly, embracing the future vision and investment strategies of McDonald’s. Based on all of this, the company gives out franchises.
Ongoing Costs Of A McDonald’s Franchise
The ongoing costs of a McDonald’s franchise are divided into two parts: a monthly service fee and advertising and promotion costs. The monthly service fee totals 4% of the gross sales at most places in the United States.
However, the exact fees for Alaska, Hawaii, Guam, and the Northern Mariana Islands is 4.5% of the gross sales. The advertising and promotion costs are up to 4% of gross sales.
Other than the total investment cost and all the additional costs, some ongoing costs need to be taken care of. One great thing about the ongoing costs is that it depends on the franchise’s gross sales rather than the type of establishment you would go for.
Hidden Costs Of Running A McDonald’s Franchise
With most food businesses, quite a few hidden costs are incurred and are very common. These may include everything from remodeling the restaurant to food trails and everything in between.
The hidden costs of running a McDonald’s franchise include
- Create Your Taste Kiosks – $125,000
- McCafe espresso machines – $13,000
- Muffin equipment – $4,500
- All-day breakfast equipment – $500 to $5,000
- Interior makeovers, including upgrades to digital menu boards – $600,000
- Complete restaurant remodels – $1 million to $2 million
Quite a lot of restaurants given out to franchisees are old. For this reason, they need to remember that the restaurant must be remodeled.
If the franchisee, by any chance, refuses to do the same, McDonald’s may even decline their franchise renewal. Hence, McDonald’s expects franchisees always to have about $750,000 in liquid cash.
How Many Companies Owned Vs. Franchised McDonald’s Stores Are There?
As of 2023, McDonald’s has about 40,275 locations worldwide. However, only 7% – 2820 outlets – are owned by McDonald’s corporation. The remaining 93% – 37,455 locations worldwide – are given out to local business owners as franchises across 118 countries and territories.
McDonald’s expanded its chain worldwide after the company got the recognition and love it needed in the United States. Once the company began expanding worldwide, most of its locations were given out to local business owners as franchises for better management. As of now, most McDonald’s locations worldwide are franchise owned.
How Much Does A McDonald’s Franchise Owner Make?
A McDonald’s franchise owner’s money depends significantly on the profit margin. The higher the profit margin, the less time it would take for the franchisee to get a return on investment.
As per platforms like Mashed, and a few former and current franchise owners on Quora, a McDonald’s franchise owner can easily make a net profit of about $150,000 in one year. This is based on the fact that the average sales per year comes to $2.7 million.
Here is the logic behind it. As per the sales analysis of Franchised McDonald’s restaurants for one year, the annual sales 2021 totaled $3,366,000.
Based on that and as per quite a few analysis carried out, if the mid-point of investment is taken as $1,813,897, it would take a franchise owner 8.5 years or less to regain the initial investment, with a profit margin of 10%.
Of course, the period would reduce if the profit margin for the business is higher. If you want to know more about the same, read our article on how much McDonald’s franchise owners make to get all the numbers.
How To Open A McDonald’s Franchise?
Opening a McDonald’s franchise may seem like a piece of cake, but it can be tough. Not tough necessarily, but there are quite a few requirements that the company expects their new franchisees to fulfill.
They have a set of criteria that need to be met before you can approach them to open a franchise. These criteria include the franchisee’s ability to:
- Invest without partnerships or investors.
- Devote full-time and best efforts to the business, including exhibiting personal management and leadership in the restaurant business.
- Commit to an extensive training program that includes their ability to participate in several different parts of the day and days a week depending on restaurant operating hours.
- Open to relocating based on the availability of restaurants.
- Embrace their values, future vision, and investment strategies to meet customers’ needs.
If any person willing to own a McDonald’s franchise fits all the criteria mentioned above, they can apply online for a franchise via the official website of McDonald’s.
Once the application is made, McDonald’s Corporation does a phone interview, background check, and credit check. Following that, the franchisee will have to go through a panel interview, asset verification, and a review process of legal documents. Once applicants pass these steps, they enter the franchisee training program.
After the franchisee completes the training program, the franchising team from Mcdonald’s will connect them to restaurant opportunities. This way, the franchisee can negotiate with the selling franchisee, after which Mcdonald’s will approve the transfer of ownership.
Is Opening A McDonald’s Franchise Always A Win-Win Situation?
Opening any business can be very dicey. There are always chances of it going fantastic or entirely down the drain. One great thing about franchising is that quite a lot of things are handed over by the leading company, making the transition easier than owning a business from scratch.
However, franchising has various limitations, especially in terms of creativity and specific other ways of expansion. Although McDonald’s claims owning one of its franchises is a win-win situation, some may even say otherwise.
So, most franchise owners on Quora answered this question as honestly as possible by stating the obvious: it depends on various factors. These factors include the location of your franchise, the sort of clientele, their spending habits, and a lot more.
A few franchise owners have answered on Quora, saying they made a profit from their investment much sooner than expected. However, quite a few even said that the first franchise might not be as profitable as quickly, but once you begin expanding, it keeps getting better.
So yes, the investment needed to open a McDonald’s franchise is high. However, like every other business, whether owning the franchise will be profitable depends significantly on factors about the surroundings. It could be a win-win situation if you get lucky with all these factors.
Should You Open A McDonald’s Store?
Most franchise owners, however, have one answer in common with this question. They all say you should be wary of all the factors that make up a franchise. The location, the amount people would be willing to spend there, and how much rent you pay are critical factors.
The answer to this question is whether you should open a McDonald’s store depends on your preferences.
Moreover, it eventually comes down to how good the food is at the said restaurant, which determines the sales. So, if the factors are lining up for the restaurant to be profitable based on everything, only then is it worth investing in a McDonald’s franchise.
Since we have talked so much about McDonald’s franchises, a few other questions about the place may have crossed your mind.
So, you should check out all these FAQs about McDonald’s, like if McDonald’s pays weekly, biweekly, or monthly, how much they pay their employees, if the employees get free food, how old you have to be to work at McDonald’s, and if the McDonald’s employees get any benefits or not.
Drop in the comments if you are convinced to open a McDonald’s store or not, and until then, have a good one!
Frequently Asked Questions (FAQs)
How much is the initial investment in opening a McDonald’s franchise?
The initial investment in opening a McDonald’s franchise can be between $481,000 – $2,450,000.
Is it profitable to own a McDonald’s franchise?
Whether or not it is profitable to own a McDonald’s franchise depends on an array of factors, like the location, rent, and clientele.
Is it easy to get through the McDonald’s franchisee training program?
If all the criteria given by McDonald’s are met, it is undoubtedly easy to get through the McDonald’s franchisee training program.
Where can you apply to own a McDonald’s franchise?
To own a McDonald’s franchise, you must apply directly on the company’s official website.
